March 27 (Bloomberg) -- Tata Steel Ltd., India’s largest
producer of the alloy, plans to raise as much as $1 billion
selling high-yield bonds, according to three people familiar
with the matter.

The company is in talks with banks to arrange the sale,
said the people, asking not to be identified because the terms
aren’t set. The banks may be hired by early next month and
proceeds from the sale will be mainly used to refinance loans,
the people said. Charudatta Deshpande, Mumbai-based spokesman at
Tata Steel, declined to comment.

Tata Steel joins Vedanta Resources Plc, Jindal Steel &
Power Ltd., Reliance Industries Ltd. and Bharti Airtel Ltd. in
tapping overseas markets for funds to refinance debt or pay for
capital expenditure. The Mumbai-based company separately is also
raising money for it’s new factory in the eastern state of
Odisha. It last sold dollar-denominated bonds in November 2009,
according to data compiled by Bloomberg.

“If the bond proceeds are used for refinancing, the
company’s debt level will remain unchanged and hence that will
not result in an improvement of the company’s financial
metrics,” said Mehul Sukkawala, a Mumbai-based credit analyst
at Standard & Poor’s, which has a negative outlook on Tata
Steel.

Tata Steel fell 2.5 percent to 306.55 rupees at the close
in Mumbai yesterday. The stock has slumped 28 percent this year,
compared with a 3.7 percent decline in India’s benchmark S&P BSE
Sensex.

New Factory

Tata Steel plans to raise as much as 130 billion rupees
($2.4 billion) in the next six months to partly fund a 6 million
metric-ton steel factory to be built in phases, the first of
which will be completed by August 2014, Chief Finance Officer
Koushik Chatterjee said on a conference call last month.

Tata Steel needs to redeem a total of $5.5 billion bonds
and loans by November 2016, according to data compiled by
Bloomberg. The company raised $547 million selling 4.5 percent
convertible notes in 2009. Most of the group’s net debt of $10.5
billion was taken to fund the $12.9 billion acquisition of
steelmaker Corus in January 2007.

Steelmakers in Europe, where Tata generates two-thirds of
its output, are grappling with excess capacity, falling prices
and rising operating costs. The region has a capacity to make
about 210 million tons of steel a year, while demand in a
“normal market” is 150 million to 160 million tons, according
to industry lobby group Eurofer.

The alloy maker’s losses, including those of Corus, renamed
Tata Steel Europe Ltd., widened to 7.63 billion rupees in the
three months ended Dec. 31 from 6.03 billion rupees a year
earlier, the company said in a statement on Feb. 13. The median
estimate of 25 analysts in a Bloomberg survey was for a loss of
1.99 billion rupees.

Vedanta Resources, the oil and metals producer controlled
by Indian billionaire Anil Agarwal, is seeking about $3.5
billion of loans in its biggest refinance plan to help extend
maturity of the debt, three people familiar with the matter said
on March 13. The London-based company has hired Bank of America
Corp., Barclays Plc, JPMorgan Chase & Co., Royal Bank of
Scotland Group Plc and Standard Chartered Plc to arrange the
financing, the people said.